Using Data and Digital Technology to Drive Next Generation Customer Experiences

Jim Marous:

Hello and welcome to Banking Transform the top podcast in retail banking. I'm your host, Jim Marous, owner and CEO of the Digital Bank Report and co-publisher, The Financial Brand. Digital banking transformation involves integrating digital technologies with data and analytics to enhance customer experiences, drive growth, and make an organization more future ready. Building improved customer experiences and greater engagement involves more than just the customer service area, and IT. It must involve the entire organization, including the backend of the business process. The entire company must provide seamless digital customer experiences using the technology and data at hand. We are fortunate to have Stephen Bohanon, the founder of Alchemy Technologies on the show. Stephen discusses how organizations of all sizes need to leverage modern technology in customer insights to stand out in an increasingly competitive marketplace. So welcome to the show, Stephen, you have a pretty long career in financial services with the last 13 years being at Alchemy. Can you share with our audience a little bit about how you founded Alchemy and how the organization has evolved over the last more than a decade, actually?

Stephen Bohanon:

Oh, that's a good question. So yeah, starting with Alchemy, it was 2009, right? So you remember our industry wasn't in really good shape at that time. And I would just say part of it is luck and from a timing perspective, quite honestly, what I saw was that you had the early first generation digital banking systems that were built in late 90s and early 2000s, built at a time when maybe 2% of people were online checking their balances and really just looked at as an alternative to going in the branch if the branch was closed or the call center didn't have their hours. So they were pretty rudimentary and basic. And over the years they had added a few things like transfers and bill payments and maybe e-statements, but that was kind of digital banking. And the systems were kind of old and tired.

And these were never really built with the idea that they would be the primary interaction point between the banker, credit union and the customer. They were never built with that in mind. They were built as this supplementary kind of off hours self-service channel. And so it was about that time that you started to see, obviously, travel agents started going away and people started going to Expedia and Travelocity and Price Line and things like that. Obviously the record stores start going away and now you start moving to streaming music and movie platforms, things like that. And when I looked at financial institutions, I said, okay, well, they don't have any product that has to be delivered physically, so obviously they're ultimately going to be electronified because there's no cheaper, faster, more efficient way to be able to deliver a product than digitally or electronically.

And so it was kind of seeing this trend happening in these other industries and then looking at the solutions that were there for banks and credit unions and saying, okay, all the platforms are available, and I won't go over their names, but all the platforms that are there were really never built with this intention in mind. And they're still on old technology stacks, some of the big multi-billion conglomerates had bought up a lot of the small players. At one point, I think Fiserv had 13 different online banking systems that they had kind of either built or developed or bought over time. And so I was like, hey, no one is here to take advantage of this. So it actually came about... I was actually doing a stent for about a year and a half with a consulting firm where I was helping them do vendor evaluations.

So I was hired by the banker, the credit union, to come in and do an evaluation and you get to see all the RFP responses come in, you get to see the feature matrix, you get to see the demo, you get to see the pricing whenever the vendor leaves, you get to hear what the customer wished that the vendor had and that they didn't have. And so this idea began to form that, man, this market has gone a big shift. All the major players that are in here don't seem to see it, or they're just trying to stay alive because 2008, '9, '10 were really tough for banks and credit unions and the vendors that supported them. So weren't putting a bunch of money into R&D to build kind of this next system. And so that's where this idea was, wow, there's this great opportunity, this big shift that's getting ready to happen and really nobody is really doing anything about it.

And so that was where the idea for Alchemy was born, and the idea was really kind of three basic tenants. One was there's going to be a focus on the UI and the user experience side of things, so we're actually going to make it pleasant to interact with as opposed to looking like a spreadsheet on a webpage. The second was we're going to focus on from a user experience API integration instead of single sign-ons. Because digital banking of that first decade that it was there as features got added, it was just this patchwork quilt of single sign-on. It was like a link farm that you logged into and then you just single signed on to eight other systems. And that was a horrible user experience and you couldn't get the data from it. And it wasn't very portable to mobile either. So our focus on the user experience was we'll have an API integration so that we can actually offer a very holistic and portable user experience across all kinds of devices.

And then the third piece was we're going to sink in all the data from these systems of record so that you can actually leverage the data to deliver content to users so that you can market to them in there because eventually it's going to move to where the entire sales channel is digital. So those were the three principles that were founded with Alchemy, was just like if we were to look at other industries and what happened to them and where they were going. And we used to say, what will banking look like in 2020 back then in 2009 and it was kind of this vision of that.

And so actually reconnected with the person that I had worked with initially back in... I started my career in this industry in '97 and said, "Hey, got this idea," and this person funded the prototype to go build this idea. And then we went and demoed this to various potential customers and partners and things, see if anyone would bite and actually got someone to bite on it and said, "Hey, if you can build that, we'll buy it." So that's how it started from August of 2009. And then we signed our first contract in January of 2010.

Jim Marous:

It's kind of interesting, you kind of were doing research on somebody else's dime, which is a great way to do it. Actually, in my first career outside of the banks itself was doing the same thing. I did research in my old dime and somebody else's dime just said, maybe there's a pocket for me to be in this. And it's interesting, your company's website, you stated that your company is focused on future proofing, your customer's growth strategy with a platform that maximizes UX and data. Now, that's a lot to absorb, but as you mentioned a reference, your major back office processors all would state that they do this.

And you're not alone in this solution provider area that you are providing things that could be seen as duplicative by a financial institution's management team, where really there's some real advantages to saying you may want to double down on investing with us and you're not going to get rid of your core provider. How do you solve for that? How do you fit that niche that basically is maybe duplicative to what the core provider says they can do, but still provided so that a financial institution says, I've got to double down on this investment?

Stephen Bohanon:

Well, I think I understand your question. When you say duplicative, do you mean duplicative with what the core provider offers? Is that what you're saying?

Jim Marous:

What the core provider says they offer.

Stephen Bohanon:

Look, they're enough history now to be able to objectively state the reality, I think. And that is that core providers are interested in being core providers and generally card processors, that's where their focus has been. In fact, over the last decade plus, I don't know that... I'm not sure, maybe one I can remember of where a core provider bought a digital banking platform. And whereas the 2000 to 2010, the core providers bought up all the digital banking platforms. Now that this was at a time, whenever they were trying to protect us, everything started to move off the core. Whether it be the teller systems moved off the core and the payment systems, the card system, everything's moving off the core. And so then they went out and bought up all these point solutions to try to pull it all back to be on the core in a sense.

But it's really interesting that they really, none of them have come out with a product for their core customer base that at least not that I know of that any of them really like, probably Jack Henry Banno is probably be the exception of that. They've done really well getting their base over to the Banno product. But when you look at kind of Fiserv and FIS, and Finastra, Finastra did buy Malauzai, but it hasn't really then flourished since then. And I think it's kind of like there's a DNA of a core and card processor. I mean, these are systems that many of them have been around for 30, 40 years. Some of it's the same tech stack. It's about, hey, it's reliable, it's bulletproof. It's a race to zero from a cost perspective. So we're just trying to eek kind of cost reductions out of it.

That's a very different mindset than what a digital banking company has to have when they're thinking about it, where they're saying, "Hey, this is the primary competitive storefront that we're out there competing with. We have to stay up with all the competition, which includes the mega banks. That includes the direct to consumer FinTechs, meaning I have to pump lots of R&D in this and I have to experiment a lot, and I have to be willing to break a few eggs to make an omelet." And all those things that is inherently contrary to a core provider in the way that they think about technology. So I'm saying it's a DNA issue with the company, is that you're asking them to be something that they're actually not. And so the evidence we have of that is, again, they still have... In fact, if you add up all the total users, Fiserv's got more users than anybody else across their 10 plus different digital banking solutions that are out there.

But it hasn't really happened. You look at NCR, Digital Insight, NCR buying Digital Insight. Well, NCR was really a hardware and service company buying a software company, trying to transform, but it's not an easy thing to do. Because you're kind of going against the grain. If you look at that, who has actually made a headway in the market with solutions that financial institutions are adopting and moving to. There's a few of us out there, and all of us started as digital banking companies, and that's whose grown.

Like I said, probably the one exception is Jack Henry, but they had purchased Banno and then poured a bunch of money into it in order to make it competitive. But that's the exception to the rule when it comes to the core providers and digital banking. So I think it's just a mentality and a mindset. And then the overall competitive industry, how much VC money has been poured into FinTech, so much of it comes up to the user interface, the user experience, things like that. And those aren't really things that the core providers... I would say, they're not known for specializing in those things. Well,

Jim Marous:

And it's interesting. You solve for the entire digital banking transformation process. I call them seven different layers of things everywhere from data analytics, to insight to customer experience, to legacy back office systems, all these other things. But while we talk about using data to build better customer experiences, the research that we've done, the digital bank report shows that just about only 25% of organizations globally consider themselves adept at the most basic applications of deploying insights for better customer product recommendations and better experiences. Why do you think this is so hard? I mean, we know the logic, I mean, I'm sorry, but I go back 40 years and using data to try to build a better experience... Well, I wasn't called that you had CRM systems, you had everything else. But why is it so hard for our industry to embrace delivering more than just basic transactions?

Stephen Bohanon:

Well, the proficiency of using data is something that, one, it's new to all of us as a human race that being able to get good at that. And then within it though, you see some of the companies, marketing companies do a really good job of this. Some of the social media and true e-commerce companies do a good job of this. So you'd say there's the entire kind of topic or subject of being good with data, and then you have to go to each industry and kind of say, well, which ones use it better than others? So I would say that generally speaking, the financial services, there's been a laggard in when it comes to technology, quite honestly. So it's like, first you got to get good at technology, then you got to get good at what the technology creates, which is some of the data. Then you got to learn how to turn that back into leveraging-

Stephen Bohanon:

[inaudible 00:13:00] creates, which is some of the data, then you got to learn how to turn that back into leveraging the technology again. So I would say that the reason for that is that banks and credit unions don't consider themselves technology companies by and large. And I mean, look at it from who sits in the boardroom to who the executives are, to the type of people that they hire in order to run maybe their digital channel. A lot of people are still trying to... Well, who will raise their hand and someone says, "Well, I have a computer." And so I'm being obviously a little facetious there. But you see that the winners in our industry when it comes to basic [inaudible 00:13:37] are those who say, "Technology is a strategic differentiator for me. And so I'm going to go out, I'm going to invest in some great talent that I'm going to pull in, maybe not from my industry. They're going to come in and apply what they know to the banking industry."

And those are the ones that we see even among our customer base where they do really well whenever they do those types of things. Well then now under technology, now that I have a subset, which is now I'm broader on technology, I think I'm doing better. But now how about data itself? Well, that's lagging because the use of data has come after technology in terms of the adoption curve. So what I would say though is the problem, the reason you have the 25% why it's so low. One, I'd say the first thing is most of these institutions don't have access to the data. So either the platforms they use, the systems they use doesn't actually provide the data that would be useful. Of the ones that do then provide the data, then you have to be able to assimilate the data into something that people can understand and understand how they potentially could use it.

And there you have to have tools or different kind of human capital knowledge to do that. And then you have to say, "Okay, well now that I have the data assimilated in an easy-to-read fashion that I can make sense of it. How do I then take and activate that and use it?" And that's a whole nother skill, right? So I think that the...

Jim Marous:

That's the last mile as they talk about it, and that's the hardest part.

Stephen Bohanon:

That's right. So I think that is where you have obviously other industries that have the tool, they have the data. They have the tools to assimilate the data and to make sense of the data, and then they have the people that know how to leverage the data in order to use it to drive their business. So I think it's really just the lack of the tools and the people in our industry by and large, that would make them say, "Yeah, I'm not really good with data. I don't either. I can't access it. If I can't access it I really don't... I got it all here in my data lake somewhere, but I don't really know how to put it together to make it make sense." And then if I do have to make sense, then what's next? I don't have the person that can tell me that. So I think that's a combination of those three things that make us kind of more of a laggards when it comes to leveraging data. And I'm saying as the industry as a whole.

Jim Marous:

So see, what are the most significant challenges you see in the marketplace as you're going to meet organizations, those mid-size organizations that really need your partnership? What are the challenges that the customers face that you're trying to help them with as they're trying to leverage modern technology in a vastly increasing amount of data?

Stephen Bohanon:

Well, I think when you... Keep in mind for the type of customers that we have, so we generally go after the mid to upper tier customers, right? So we focus on the top 1000 banks and 1000 credit unions minus the mega banks, and we don't really focus on the bottom 7,500. So there's a certain level of sophistication that's inherent in our customer base, they have a bit more scale, so it's just a bit larger and things like that. And the other thing that you have within that, what's true for that sector? Digital banking is 100% replacement market. The systems we're replacing, generally 70% of our target market is already on what we would call a best of breed digital banking system, meaning it's not the thing that just comes that bolts onto their core provider. So they've already said this is, and they've taken that same mindset generally, and they've applied it to lots of other systems that they have.

Their card system, maybe they have their debit with one provider and their credit with another provider. They've got their core over here. They've got their RDC with this other product. They've got their teller system over here. They have their bill pay with this other system. And so what they have done is they have said, "We are going to go pick best of breed and all these various things." And then this is where the difficulty comes in. Well, now the challenge is I have to then reintegrate all that back when it comes to my customer facing interface. So when we started, Jim, we looked at our old contracts from 10, 11 years ago or whatever. On average, when we signed a digital banking conversion, we had to interface to eight third party systems. It was like the classic ones, bill pay, core, eDocs already see some of these kind of things.

Today that number is generally 18 to 20 integrations that we have to do just to get the first person live. So I would say one of the biggest problems that people have is while they have done a good job by picking the best tool for the job and not just saying, "I'm going to buy it all from one logo and everything be mediocre." That it then turns into a problem later because now how do I pull it all back together? The user experience of it. How do I... Every single one of these products are different software companies, different database schema, different request response, payloads. And so how do you then take all that back from 18 to 20 disparate systems and then read back and normalize it back to where I could actually make sense of it? That's what's difficult. So in some ways, it makes it harder. When everything was on the core, yes, not all the products were as good, but at least you only had one database you had to mess with.

You get it, but now technically every single one of those products have their own databases and their own insights of users' actions and interactions and all those types of things. So to pull all that back together is not an easy task. So I think it's just the... That's what makes... It's the complicated, complex nature of it that makes it difficult to start with. So I think that's probably the number one thing that our customer base, which is on average has about 100,000 customers or members. That's the hardest thing they're dealing with is we love the products that we've bought, but to pull it all back together to get the right data and to be able to have a full view of what this product is doing or how this customer's interacting with us. Very, very difficult.

Jim Marous:

So Stephen, you don't sell to everybody, but it sounds like you bring all these solutions to bear that can really help organizations move forward. When an organization says not now, why are they usually saying that?

Stephen Bohanon:

And when you say not now, do you mean not now to replacing the digital banking platform or not now maybe to an additional product module?

Jim Marous:

I'm going to say both. Well, moving forward, from a digital banking experience perspective, why would they not invest in the solutions you provide?

Stephen Bohanon:

I think a couple of reasons. There's a couple reasons that we would hear when they would say, not now. One would be, we've got a lot of projects, and this isn't something that we can assign one or two people to go and do this on the side. Really, when you're talking about a digital banking conversion these days, it takes the entire company in order to be able to pull it off because it touches everything. So I do think you don't want to have a bunch of other things going on at the same time, a bunch of other initiatives. So I would think sometimes it's just literally a timing. We see that a bit whenever you have people that maybe are on platforms that are 5, 7, 10 years old, let's say. And they're like, "You know what? We're re-up with our current provider for another year or two because we understand that we're going to have to mark out the full year in order to make this thing happen."

So I would say that's one of the reasons of not now. I think the other reason of not now, and it's something that we are really focused on right now, is that depending on the system that you're on, especially if you're on one of what I would call the specialist systems. Where people that aren't just, "Hey, core is our business, and here's an online interface." But if you're with one of the folks like Alchemy or Q2 or someone like that, it could be, "Okay, I could agree that your system is better than the system I've got, but how much better is it really?" Yes, it can be a little bit better, but when you try to draw a straight line to say, how much money am I going to save because I'm going to spend a ton of money and time as an organization to even just convert over to it. It's probably a seven-figure number when you add up to human capital and everything else.

If I only going to move the needle a couple of clicks or something, is that really going to make a difference? And I think that has to do with so much is that digital banking, I've been talking a lot about this lately. Digital banking is really synonymous with digital service. That's the reason it actually was created, was to be a self-service channel. And so therefore, all of the justification for going to the systems are it'll reduce calls to my call center, it'll reduce visits to my branch. These are expensive in-person service channels. And so if I can make it self-service, people don't have to come into deposit a check. People don't have to call me to ask what their balance is. People don't have to call me to transfer. Businesses can run all their stuff without having to call business operations. I think that what's happened is most of the juice has been squeezed out of the lower your cost with a digital banking provider. There's just not that much more you're going to... People have adopted it.

So now when you walked in, if you're paying a dollar to your current provider. And I come in and say, "Look, I've got this really great UX." And everyone says, "Yeah, it really is. It looks better than what we've got." "By the way, mine's a $1.50." And they're like, "Yeah, I can't find where I'm going to make that 50 cents back." I can be happier with it. And so credit unions have a little more flexibility than banks, obviously, because they're just about their members and they don't have to worry about shareholders. Banks have less flexibility because they're about returning results to the bottom line and profits back to their shareholders. So I say all that to say, that's kind of where we sit, I think today. And so if you are not thinking about the revenue generating side of digital banking, you're going to have a really difficult time moving forward and replacing these best of breed systems because there's not a lot more juice to squeeze out of the service side.

So now that's when we focus on the sales side. And then who can do the best sales? Well, probably who does the best marketing. Well, who does the best marketing? Probably those that have the best data. Who has the best data? And that's where we're trying to lead back to Alchemy. So I really think we've already started changing our language, stop calling it digital banking. We still use the term because for SEO and things like that, but we really talk about, it's a digital sales and service platform. You should be able to rely upon us to increase your revenue or lower your cost. If you've squeezed all the juice out of your cost lowering initiatives, you're about as efficient as you can be. Well, then you going to need to look the revenue side of it. So really, in fact, the last two acquisitions we've made have all been around the sales side, account opening, and then the segment for the data and marketing side of things.

So I would say we were guilty of really thinking about the service side and mainly having television around that, because that's just what we've always been is it's been a service channel. But it's really making that shift and saying, "No, no, no, it's a sales channel." And I'll show you, Jim, I mean, where that shows up is even in the vendor evaluations, it's like sometimes we have to tell them, you need to have your CMO involved in this decision, right? Because they're like, "Well, wait a minute. This is a technology discussion. I've got all my technologists in the room." Like, no, no, no, who's over retail, who's over marketing, right? And so sometimes they're not even involved by default in these digital banking evaluations and we're saying they have to be part of it because you're not going to see as much on the cost savings initiative as you're going to see on the revenue generating side of the house.

Jim Marous:

That's very interesting, because again, it's the banking mentality. It's cut cost, cut cost, cut cost. We talk about customer experience. We do a terrible job deploying against it. I mean, what's interesting about our surveys every year about trends and predictions, we realize that organizations put customer experience number one, and then when they talk about investments or things, they really want to double down on. Data and technology, data and insight, is surprisingly low in the priority scale. Now, there are priorities, but the reality is, unless you deploy against one thing, you can't get the other. And as you said, the differentiator in the marketplace is not going to be who delivered the products to me, the cheapest. It's who knew me, understood me, and rewarded me for my banking relationship.

You talk about experience, and it's interesting because we're hearing more and more about engagement, which has actually taken the, "Oh, I'm satisfied with what you gave me." And going that one step further saying, "How can my financial institution deliver recommendations that make me a better financial steward of my money?" How is Alchemy trying to address this shift in the marketplace from just delivering a nice, seamless experience to really looking and saying...

Jim Marous:

Nice, seamless experience to really look at it and saying, "How can I deliver the next best product?" Not in a sales way, but in a service way as you referenced.

Stephen Bohanon:

Those two things can be interwoven if you do it right.

Jim Marous:

Exactly.

Stephen Bohanon:

So yeah, I would say that engagement, it's like an umbrella topic. I definitely think financial wellness sits under that umbrella as a way to engage, and obviously it depends on where people are in their financial health. So products like Savvy Money and Array, which are credit reporting and monitoring, that's a great way to engage people. Because not only do they see their credit, but they get notified whenever your credit dropped or a few points or rose a few points, or you had an inquiry or a new account showed up, whatever. You stay engaged with that because it's affecting you. We have our savings goals, we have our spending analytics, recurring expense notifications, things like that. It's like the mint.com type of experience within there. That's a way to keep them engaged, so that that's all within the financial wellness side of things. The other thing I think with engagement would be, and a lot of our customers do this around rewards. You can have card-based rewards, and/or I would call it account-based rewards.

Earlier before the recording we were talking about Kasasa a little bit and what they do to engage in and actually incentivize specific behavior. Then let people know, "Hey, you're three card swipes away from you getting your rewards this month." That's the way you engage. We have one of our customers that this is really, really good. They have some of the most engaged users on our system. They years ago, decided they were going to make alerts a product. So we think of a product that it's a checking account or a shared draft account or a loan or whatever. They said, "Those are all products too, but we're going to make alerts, digital banking alerts a product and we are going to track." When they say, "Our members or our customers have on average four products, five products, six products." They started saying, "We're going to make alerts a product." Most of our customers have about 10% of their users subscribe to alerts. This customer has over 50% of their users subscribe to alerts in the system.

Because their mentality is, look, if that user is getting an alert every single time their card gets swiped or when their balance falls below a thing, or when a bill gets paid or when the wire is cleared or whatever, it feels to them, like we're constantly communicating with them about their finances and watching it, and they can just rest easy. I'll tell you, the results are pretty astounding with what they have. Their users engage, they log in more often than the natural cohort does because they're constantly getting things pushed to them. It's almost like they're a century for their, in this case, their members. So that that's another way that you can have engagement, has nothing to do with financial wellness. It's the overall operating of your checking or your bank account is just ensuring that people are signed up for these alerts. It feels like you're constantly keeping them abreast of what's going on with their finances. So that's another really great way to have engagement as well.

Jim Marous:

That's a great case study because it really is engagement and it's continuously reinforcing why you're banking with me as a finance institution. What better way to say, "Here's something you may want to take advantage of." Maybe your deposit level is much higher than it used to be. All these things that we take for granted and we say, "Well, we should do it." But we don't get down to that micro level. What's also interesting, it's all personalized because it's all driven by transactions. That's a great example. We've also talked in the industry more and more around democratization of data, making it so that the insights are not held by the IT department. Not held in reports, but spread throughout the organization so that people can deploy them for innovation, for new product development, for customer care across both human and digital platforms. Are you seeing organizations doing more and more of that? Is that putting even more pressure on your organization to deliver those insights?

Stephen Bohanon:

Yes. I can't remember if I went into detail with this before, but we've had a data product for a long time. The reason we bought Segment was because of what our customers were telling us is like, "Yeah, you got all this data, but I need to know how to turn it into action. You give me the tools, I can parse it any way I want. I can filter it, sort it, sum it, average it." You do all those things, but the next action, and by the way, where's my benchmark for this data? There's companies obviously, especially in our space that this means good, this means bad. This is where your peers are, that kind of thing. So having just the data wasn't enough or even having the tools to manipulate the data wasn't enough because people wanted benchmarks. They wanted to be able to then obviously lead to next best actions or whatever action they should take. So we call actionable data. So what we did with our customers, we put together a product feedback group on this. We have created an executive dashboard within the system.

The reason we did this was specifically because of what you talked about with democratizing the data. I've got a lot of different consumers of this data. Some of them are going to care about certain things than the other. So what we had to do is we had to work with our customers and say, "What are the key metrics that you're really judging your digital channel off of or your strategic goals?" It was things like, we want more and more people actually of our overall customer base, using digital. Because funny enough, Jim, whenever, this is a little bit of a side note that ties in here. When we work with our customers, they give us their call center stats and stuff, what people are calling in for. They said, "Still the number one reason people call the call center is to check my balance." People are still calling call centers and waiting in lines to ask what their balance is whenever digital banking has been... That feature has been around for 20 years.

So part of theirs is like, look, and by the way, our customers will tell us every single call, fully loaded cost is 20 bucks a call. So every single time someone wants to check their balance, it's 20 bucks if they call my call center.

Jim Marous:

It's one click on your phone.

Stephen Bohanon:

Right.

Jim Marous:

And insane to believe that.

Stephen Bohanon:

All day, every day. So within the data side of things, in the executive dashboard we were talking about, the customers have said, "Look, I want to track my adoption. I want to track my mobile adoption. I want you to tell me where I am on that trend. My total, my trend, how I compare to other peers in my size. How I compare to the other 200 alchemy customers on the digital banking platform. I want to know e-Document enrollment, I want to know mobile engagement. I want to know P2P and bill pay engagement." So what they've done is they've said, "Here's the things, there's nine to 12 of them that are just really key metrics that we all agree that we're going to track ourselves on." You make that in something that I can go into every single board meeting, we review this, we review these stats, and we all know this is good, this is bad, this is okay, and this is where we are.

I think the first thing is you have to determine what of the data is important to me and that I want to track. Then you have to really probably tie it back. One of the best ways to ensure you're going to get data if you're a bank or a credit union, give financial incentives and goals, your year end bonuses based upon hitting certain data metrics. All of a sudden people are going to say, "Where's that data? I need to know what that data is. I need to know how it's trending. I need to pay attention to it." So I think the first thing is having digital metrics that actually tie back to your corporate goals that ultimately tie back to people's pocketbooks. Then all of a sudden people will figure out a way to get that data and to watch it.

Jim Marous:

Well, that's amazing. Stephen, you're a founder, you're a business builder, you're also a legacy financial services executive with decades of experience that we discussed. How do you balance the experience you've acquired over the years with the need for yourself to embrace change, take risks, and possibly look beyond your comfort zone on behalf of your company for what you need to do next? You've mentioned the acquisition of Segment, but how do you keep your eyes on the marketplace to say, "What do I need to do next to become a better partner for my clients?"

Stephen Bohanon:

Jim, it sounds like you're saying that I'm an old dog in this industry now.

Jim Marous:

No, no.

Stephen Bohanon:

You're a skeptic for a new trick.

Jim Marous:

Far be it from me to call anybody the old dog in the industry.

Stephen Bohanon:

Oh gosh, it has been 25 years. That's really weird. I've been 25 years in this industry. I'd probably be naive if I would think that I don't have certain blind spots with things, or maybe I'm skeptical about certain things because maybe we've seen it work. So that probably happens. I would say that one, fortunately for me in my career, I've always worked for these smaller growing software companies whose job it was to disrupt something that had always been done a particular way. The first company I worked for in this industry, I worked to work for a company that was 30 people. They were the pioneers in check imaging software and check image processing.

Jim Marous:

There you go.

Stephen Bohanon:

You remember the old days of returning checks to everybody. It was like, look what we do. We revolutionize the way the back office processes it. We get rid of checks, we have e-Statements. That was a big thing. So we were going out and replacing IBM and Unisys and NCR and these old mainframe based systems. I've had the good fortune of always being part of a company that was trying to disrupt something that's always been done a particular way. We were always trying to change it. So I think that has stayed, that's a habit and a muscle that I've developed over that time. But still, whenever you're in it, the industry for a long time, you can't help but to start to form these certain ideas that become hardwired in your mind. You don't even sometimes question the underlying assumptions there. I'm not saying that I can't be guilty of it, but I am saying that I'm probably a little bit more protected from it maybe just because of the type of companies that I've worked with.

I would say the other piece that what we try to do very purposefully is we try to hire from outside of our industry. So we try to hire people, I did a talk years and years ago, maybe it was when Star Wars was big. I talked about the Jedi's and the Padawans, and it was like, you got to have Jedi's because this is a regulated environment. There's compliance concerns. This is really important. This can't be something that you just mess up because it's money you're dealing with. People have to understand how to interact with these core systems that many times are 20, 30, 40 years old. So you got to have some Jedi's around. But if that's all you have, you probably will just all have group think, right? You've all been in the industry. So what we ultimately try to do is we try to purposefully pull people from outside of the industry that are in industries that maybe are a bit more... Take a few more risks, they're a bit more on the leading edge, and then say, "Okay, how can we push the envelope here?"

The other thing that we do is I think that we tend to, and this is, we're patting ourselves on the back a little bit here. But I think we tend to attract the type of customer that is a bit more progressive. Sometimes that's as a result of that bank or credit union, hiring someone from outside the industry. Who then says, "I've got to find a vendor who thinks like me. That's not so embedded within this industry and the way it thinks." So I do think that we tend to gravitate towards, and maybe we pull them in, customers that are a bit more progressive and think outside the box. Then we hire people that are not from our industry purposefully, in the product and engineering areas and things like that, so that we can ensure that we don't get big blind spots in what we're doing.

Those are probably the two most common things we do to try to make sure that we stay relevant, don't become the old grandpas of the industry, talking about the way it used to be in my old day and all that kind of thing. You don't do that either, Jim. So I know you're being self deprecating.

Jim Marous:

I try not to. Well, it's interesting because we talked about it a little bit earlier, I think it was even before the podcast. Can you tell almost immediately upon walking into a financial institution if the relationship's going to work? A lot of times it's alignment with the vision of what the future is. There's those organizations that say, "Well, I'm doing this because I have to, but I don't really believe in it." I talk about the fact that, and especially in your market segment, that middle market where sometimes an organization's headed up by people, a bunch of guys that played golf together 30 years ago on Monday nights as management trainees and are now running the organization. They're not feeling pain because they're all making money and they all pat each other on the back. But at the end of the day, you want to find those organizations that have the vision like you do, that say, "I want to do that next big thing. I need to do that next big thing." And it's not...

Jim Marous:

I want to do that next big thing. I need to do that next big thing, and it's not always there, and for many reasons. But when you look at your company's to-do list for maybe 2023, but let's say for the next three to five years, you don't have to be specific, as that probably is not really good to do. But, what do you see as the gap, the things you really want to solve for, and maybe do better at, and actually bring more to your clients?

Stephen Bohanon:

There's a few things that we're focused on. Just so you know, we used to have one product department, and we now have three pillars within that product group now. So we have digital banking, which is the traditional legacy, when you think about digital banking and what it's defined as doing. We now have data, and then we have platform. We just made this change towards the end of last year. The reason being is, because we want to develop out the data and platform sides to where they can stand independently.

For instance, in the platform we have integrations to 280, 300 different third parties, cores, cards, payments, all these different things. Well, that's a resource that we would like to open up. It could be, obviously, not only our customers in the systems, they build on their own, leveraging our APIs. But maybe other kind of FinTechs as well, that say, "Hey, I don't want to have to go and integrate to these five systems Alkami already integrated to, can I just integrate to Alkami and it takes care of doing that for me?"

We definitely see building out the platform side. Think of what Plaid's done in the industry, as far as connecting, for data and money movement. So, that's one piece of it. The other thing is that, as our customer base has grown, and as the boom in FinTech has happened, there are so many great solutions and products that are out there. We get inundated, between our customers and other FinTech providers saying, "Hey Alkami, will you interface to our product, and put it in your platform?" Well, what we started doing a couple years ago, was started saying, "Hey, you know what? You can use our SDK to do this."

In fact, today, I don't know the exact number, but it's something like 15 to 20 of these third parties are regular users of our SDK, where they're building their products, enhancing their products, and we're not having to do the development. We deploy it in our environment, and we host it, but that has allowed us to try to keep a certain speed in the market without us being a bottleneck with all the innovation that's happening. We're actually running up into where we've got so many doing it now that we're looking for ways to make that more efficient, because now we need to either hire more people, or we got to make this easier.

So developing out a developer community that's self-service on our platform, similar to what Salesforce has done with AppExchange, to where it doesn't create a ton of additional cost whenever you sign up five new partners. That's a big focus of the platform as well, the API and the SDK, and ensuring that our product can be enhanced, and extended, and leveraged, without it being a big burden on Alkami, which allows our customers to move fast. That's a big focus for the next three to five years.

On the data side, what we're doing right now, it is tying the data into the digital banking user experience, leveraging it so that we can drive, from a marketing perspective, the revenue and the provable ROI that comes from that. We're tinkering around with some ideas around publishing some benchmarks that we would do. The data that we have is incredible between us and Segmint. If you look at the top four mega banks in the country, BVA, because of its retail history, has the most. They have like 105 million accounts, or something. Next is actually Alkami. So Alkami and Segmint-

Jim Marous:

Wow.

Stephen Bohanon:

Together, have 81 million unique accounts, as well as all the transaction history, balance, information and details on it. Behind us, maybe Chase, then Wells, then Citi, something like that. When you think about it, that's an amazing amount of data that we've got there, and I think we're in a great position to do what's going on, what's trending, where people's money moving, where, where are the trends in spending, on all manner of topics.

So you're taking that 81 million accounts, which is obviously growing quite a bit each year, and be able to do something for the industry to give more insight overall, and benchmarking for our customers. That's another thing that we're looking at right now. But in the immediate term, it's leveraging data to drive revenue into the organization. That's a big focus. I'd say, a new focus of ours. If you'd asked me a year ago, I wouldn't have said the same thing.

Jim Marous:

Well, it's exciting because, again, you have the data that can say, "Here's really what's happening. Here's really what's making things work." When you have the platform also, you have the ability to say, "Here's what platforms work the best, what transactions are processed, and what customers are using the most," which is another layer of data that most financial institutions don't know how they compare. Are they above or below?

Stephen Bohanon:

That's right.

Jim Marous:

[inaudible 00:44:03] to be done. Finally, if you had advice for regional banks and credit unions in today's marketplace, what would it be?

Stephen Bohanon:

That's a big question. I'm trying to make sure I don't sound too self-serving with it, but my brain is on the [inaudible 00:44:19].

Jim Marous:

The reality is, you're in the middle of the way people can solve for problems. So, be it self-serving or not, you're talking data, you're talking technology, you're talking platforms. The reality is, that's what making things tick right now.

Stephen Bohanon:

First thing I would say to them is, make sure that the way you're organized, whether it be your mission statement, or your KPIs, your OKRs you use, whatever happens to be, you need to ensure that your organization is organized around digital transformation, or whatever. I don't really care what the term is, because terms get buzzy and then people don't like to use them anymore. It doesn't mean they're not valid.

But, I think you need to make sure this isn't a side job for somebody in your organization, but that the organization says, "Look, the future of our industry is digital and, therefore, everything around the organization, if you were to look where we're spending our money, areas that are getting an increase in budget versus areas that are getting a decrease in budget, the type of people we're hiring, the metrics we're tracking, if we were to go into one of your board meetings and listen, that we would walk out of there going, "Man, that's a digitally-minded financial institution."

So, if you go in the board meetings and people are talking about, "Where are we going to build the next branch, and what was our foot traffic today?," and that's the metrics they're talking about, and they're not talking about, "How many product sales do we do in digital today?," if that's not a metric they're tracking, but yet they are tracking how many accounts got opened in the branch. I'm not saying that physical is gone, because people use physical pretty smartly. Apple went and created stores, they didn't have to, but they said, "Look, people need to interact with our products, and it helps the whole loop."

I think financial institutions use that. What I'm saying is, you'll see them track physical call center and branch a lot. They've got target metrics, they've got benchmarks, they've got bonuses tied to those metrics, and then they'll have scant little discussion around, or knowledge, or tracking, or insight on their entire digital channel. So I think the first thing I would say to them is, "Make sure that your organization truly is aligned around digital because, if you look forward 10 years, it will grow and physical will shrink, obviously. So, make sure that you're doing that."

I think that would be the first thing I would say. Then once they do that, then they can do an assessment and say, "Well, do we have the right systems in place? Do we have the right people here?," and everything else. But it all starts with looking in the mirror and asking themselves that real, honest question, "Am I a digitally-minded company, or am I a traditionally-minded company that plays enough in digital to be able to say I'd do it?" I think that's the question I would have them ask themselves, because then that obviously would guide their next steps.

Jim Marous:

Did I miss anything in our conversation today? You sometimes think we're going around, and I'd hate to have you leave the podcast today and say, "Geez, I wish we had covered X." There always are those things, but is there anything that you'd want to cover that we didn't cover?

Stephen Bohanon:

No. My father was a pastor for my entire childhood. One time, he wanted me to get up and preach, give a sermon, or a teaching, or whatever. This is when I was 17 years old, something like that. I remember practicing for it, practicing for it, and it was going to be a weeknight service, so maybe no more than a couple hundred, 300 people there. But, I was nervous about it. So I had created all these outlines and notes, and I went to him and said, "Now dad, how long do I have?" He said, "Well, you've got 20 minutes." I said, "Well, I don't think I can get this done in an hour." He said, "Son, you can't preach the whole gospel in one sermon." So that has always stuck with me.

Jim Marous:

That's true.

Stephen Bohanon:

So when you ask me, "Is there anything more?" Oh, Jim's, there's so much more. But, you know what? I can't preach the whole gospel in one sermon.

Jim Marous:

Do I want to go to that path of conversational AI?

Stephen Bohanon:

Yeah, right.

Jim Marous:

You go, "We'll have to do that." We have other visits. We'll have to have that be one of the topics. Because whenever you think things have settled, you wake up and find out something's really disrupting the industry. There's many people right now that are comparing ChatGPT with the introduction of the iPhone, and interaction of the iPods, and the SpaceX missions. To a degree, I think that's a pretty good assessment, because I think there's a massive amount of potential with the ability to take verbal communications, and take it to a new level. You talk about people calling for balances. Well, how about balances, and also telling them how they've done versus other quarters, and hold deeper understanding that we have at our disposal.

Stephen Bohanon:

I would say that AI, whenever you talk about the juice being squeezed out of the cost, that last piece, Chatbot interdiction for call center, and a reliable chatbot is driven by the data and the AI side of things. Probably a combination also, with a voice verification, biometric voice verification. That's probably the one that has the most left to squeeze out of it, because now you're talking about people that, for whatever reason, haven't downloaded the app on their phone, haven't registered online, they're still calling and being able to lower that cost.

We're hearing that from all of our customers, as you know, big initiatives. We've got to take the easy calls that we're still spending $20 bucks a call on, and we've got to get rid of those. So, I do think that will be the next big service thing there. Now, whether or not it transitions to, "Oh, and let me give you some financial planning advice," that's a little bit different subject because there's a lot of things like, "Well, you may not even have all my accounts. You don't even know how to advise me."

But definitely, those service channels, leveraging chatbots to get that last really costly mile out of the service channel, is absolutely going to be something everyone is focused on. So, I definitely see that. Where ChatGPT goes, and what its next rival will do, and everything else, who knows? It's fun to watch though, isn't it? It's cool to live in this age, right?

Jim Marous:

Getting it back to your comment earlier, it's not just the squeezing the cost out. The potential for value enhancement, it's enormous. Even if it's just, point you to other content available on the financial institutions site, it's fun to play with in your mind, thinking, "Geez, this can happen."

Stephen Bohanon:

Cool time to be alive, and a cool time to be in our industry.

Jim Marous:

Stephen, thank you so much for being on the podcast today. I really enjoyed it. Great to get together, Looking forward to seeing you in a couple months at your own event.

Stephen Bohanon:

All right. Thank you, Jim.

Jim Marous:

Thanks. Thanks for listening to Banking Transforms, the winner of three international awards for podcast excellence. We appreciate the support we have received to make this endeavor a success. If you enjoy what we're doing, please take some time to give our show a review on your favorite podcast app.

Finally, be sure to catch my recent articles on the financial brand, and the research we're doing for the digital banking report. This has been a production of Evergreen podcast. A special thank you to Producer- Leah Haslage, Audio Engineer-Sean Rule-Hoffman, and Video Producer Will Pritts. I'm your host, Jim Marous. Remember, the future belongs to those organizations that can connect the dots between technology and experiences.

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